Tucows 2014 Q1 Report: Net revenue increased 15% to $34.4 million

Tucows Inc. (NASDAQ:TCX, TSX:TC), a global provider of domain names and other Internet services, today reported its financial results for the first quarter ended March 31, 2014. All figures are in U.S. dollars.

Summary Financial Results

(In Thousands of US Dollars, Except Per Share Data)

 
                                                   3 Months        3 Months 
                                                     Ended           Ended 
                                                 Mar. 31, 2014   Mar. 31, 2013 
                                                  (unaudited)     (unaudited) 
Net revenue                                             34,402          29,985 
Income before provision for income taxes and 
 change  in fair value of forward exchange 
 contracts                                               1,280             431 
Net income                                                 477              77 
Net earnings per common share(1)                         $0.04           $0.01 
Net cash provided by (used in) operating 
 activities                                            (39)(2)             416 

   1. Net earnings per common share reflects the 1-for-4 reverse split of 
      common shares that became effective December 31, 2013. 

   2. Net cash used in operating activities includes an excess tax benefit from 
      share-based compensation expenses of $1.0 million in Q1 2014. Net cash 
      provided by financing activities in Q1 2014 reflects the excess tax 
      benefit as a corresponding in-flow.

“Our performance in the first quarter once again demonstrates the reliability and consistency of the business, alongside our ability to generate growth,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc. “Ting delivered another record quarter, adding more than 13,000 accounts and 20,000 devices to end the quarter at 61,000 accounts and 94,000 devices, and subsequent to quarter end, we achieved another growth milestone, surpassing 100,000 devices. After little more than two years since launch, Ting is on track to match and exceed the size of our Wholesale domains business in terms of gross margin contribution later this year.”

“Our Domain Services business continues to perform well,” added Mr. Noss. “Our Wholesale channel and our Portfolio services business both had solid quarters, while our Retail channel, Hover, delivered yet another quarter of year-over-year growth in excess of 20%.”

Net revenue for the first quarter of 2014 increased 15% to $34.4 million from $30.0 million for the first quarter of 2013.

Net income for the first quarter of 2014 was $0.5 million, or $0.04 per share, compared with $0.08 million, or $0.01 per share, for the first quarter of 2013. Net income for the first quarter of 2014 included a loss on foreign exchange contracts of $0.6 million compared with a loss on foreign exchange contracts of $0.2 million in the first quarter of 2013. Net income for the first quarter of 2014 also included the incremental investment of approximately $1.2 million for the acquisition and support of Ting customers as compared to the first quarter of 2013.

Deferred revenue at the end of the first quarter of 2014 was $72.8 million, a marginal increase from $72.4 million at the end of the first quarter of 2013 and an increase of 4% from $70.0 million at the end of the fourth quarter of 2013.

Cash and cash equivalents at the end of the first quarter of 2014 were $13.5 million compared with $12.4 million at the end of the fourth quarter of 2013 and $4.3 million at the end of the first quarter of 2013. The increase in cash and cash equivalents of $1.1 million when compared to the fourth quarter of 2013 primarily resulted from the $1.0 million in incremental tax benefit related to share-based compensation and the $0.9 million in proceeds we received from the issuance of our common stock through the exercise of stock options during the first quarter of 2014. This was partially offset by the use of $0.6 million for principal repayments under the Company’s credit facility and investment of $0.1 million in equipment purchases.

About Tucows

Tucows is a global Internet services company. OpenSRS (http://opensrs.com) manages over fourteen million domain names and millions of value-added services through a reseller network of over 13,000 web hosts and ISPs. Hover (http://hover.com) is the easiest way for individuals and small businesses to manage their domain names and email addresses. Ting (https://ting.com) is a mobile phone service provider dedicated to bringing clarity and control to US mobile phone users. YummyNames (http://yummynames.com) owns and operates premium domain names that generate revenue through advertising or resale. More information can be found on Tucows’ corporate website (http://tucows.com).